Drawing Pension\Paying Pension

DancingBadger

Apologies in advance as I'm sure this question has already been asked on here:-

OH is 60 next year and wants to reduce his working hours then. He is looking to take some tax free money and possibly put one of his pensions into drawdown to do this. However, he still intends to work and will have earned income on which he will pay tax.

Will he be able to make pension contributions from his earned income?

atush

If he takes his pension before april, he can take his 25% TFLS and draw up to the GAD rate in income.

But after april, it is my understanding that is you take any income above the TFLS you will be restricted to 10K per annum pension contribs.

Linton

atush wrote: »

If he takes his pension before april, he can take his 25% TFLS and draw up to the GAD rate in income.

But after april, it is my understanding that is you take any income above the TFLS you will be restricted to 10K per annum pension contribs.

If you have already taken capped drawdown before April 2015 you can continue taking the GAD limited drawdown and retain the £40K limit. If you take more than GAD its down to £10K max contribution.

jamesd

He can do this and he can also make pension contributions from any income he takes from the pension, though the cap remains his earned income. There are limits on recycling the lump sum into fresh pension contributions for the same person, ask if he's interested in doing this.

If he may want to pay more than £10,000 into a pension in the future he should start capped income drawdown on any part of any of his pots before 5 April 2015. This will allow him to take the 25% tax free lump sum from all pots and also to put all pots into capped drawdown and take the GAD limit amount from them without triggering the reduction in annual contribution allowance from £40,000 to £10,000. If he was to take even a penny more than the GAD limit amount plus tax free lump sum he'd trigger the reduction.

Those who do not enter capped drawdown before the new tax year can only withdraw the tax free lump sum without triggering the reduction.

atush

Linton wrote: »

If you have already taken capped drawdown before April 2015 you can continue taking the GAD limited drawdown and retain the £40K limit. If you take more than GAD its down to £10K max contribution.

Pretty sure that is what I said

DancingBadger

That makes it clearer. Thank you.